Rohingya people from Myanmar, who were rescued from human traffickers, react in a communal cell at the Songkhla Immigration Detention Centre (IDC), where they are kept, near Thailand's border with Malaysia February 13, 2014. Picture taken February 13, 2014. REUTERS/Damir Sagolj

US downgrades three countries saying they do not fully comply with the minimum standards for the elimination of trafficking

(Adds comment from Thai acting foreign minister)

By David Brunnstrom

WASHINGTON, June 20 (Reuters) - The United States downgraded Thailand, Malaysia and Venezuela to its list of the world's worst centers of human trafficking on Friday, opening up the countries to possible sanctions and dumping them in the same category as North Korea and Syria.

The three countries were all downgraded to the lowest "Tier 3" status in the U.S. State Department's 2014 Trafficking in Persons Report as they did not fully comply with the minimum standards for the elimination of trafficking.

Thailand, one of Washington's oldest Asian treaty allies, expressed disappointment. Thai officials had expressed confidence their country would be upgraded, submitting a 78-page report to the U.S. government in April to make its case.

Acting Thai Foreign Minister Sihasak Phuangketkeow asked the United States to reconsider its evaluation, saying category three was intended for countries "that have done nothing".

"It is up them to see whether we have made progress, up to them if they want to continue engaging constructively with Thailand, working together to ensure further progress," Sihasak told a news conference in Bangkok on Saturday.

"And it's up to them to consider whether Thailand is an important ally in this part of the world."

The downgrades could cause some multinational companies to reconsider investments in industries accused of using trafficked labor such as fisheries, a lucrative business in Thailand, the world's largest exporter of shrimp.

The countries could also lose U.S. non-humanitarian and non-trade-related aid and face U.S. opposition to help from bodies like the International Monetary Fund and World Bank.

The report said the majority of trafficking victims in Thailand - "tens of thousands ... by conservative estimates" - were migrants from neighboring countries "forced, coerced, or defrauded into labor or exploited in the sex trade." A significant number were trafficked into the fishing industry, garment production and domestic work.

The State Department cited media reports of "trafficking-related complicity by Thai civilian and navy personnel in crimes involving the exploitation" of Rohingya Muslims who have fled Myanmar by the tens of thousands over the past year.

Those reports included a Reuters story in December that documented a clandestine Thai policy to remove Rohingya from immigration detention centers and deliver them to traffickers and smugglers waiting at sea. Many Rohingya were then ferried back to brutal trafficking camps in Thailand, where some died.

The State Department said that not only had the government "systematically" failed to prosecute trafficking into the fishing industry, but the Thai navy had also filed defamation charges against two journalists who reprinted reports of complicity of civilian and naval personnel in exploitation of Rohingya asylum seekers from Myanmar.

That was a reference to criminal defamation charges filed by Thailand's navy against two journalists at Phuketwan, a small English-language news website based in Phuket, which published excerpts from a July Reuters report.

The Reuters report, based on interviews with people smugglers and survivors of boat voyages, revealed how some Thai naval security forces worked with smugglers to profit from the surge in Rohingya fleeing religious persecution.

The Thai navy has also filed a criminal complaint against two Reuters journalists, alleging violations of the Computer Crimes Act. Reuters has not been charged and stands by its reporting, a Reuters spokesman said.

"We have seen interlocutors who we think are actually trying hard, but of course that gets dragged down by the widespread official complicity," said U.S. Ambassador at-Large Luis CdeBaca of the Office to Monitor and Combat Trafficking in Persons.

"It's kind of like an anchor that is holding the folks who seem to be wanting to make a difference back," he told Reuters.

GROUP OF MOST LAWLESS AND OPPRESSIVE

Thailand, Malaysia and Venezuela promote themselves as modern, fast-developing countries, but Tier 3 ranking puts them among the world's most lawless, oppressive and dysfunctional.

A third of Tier 3 countries, among them Mauritania and Yemen, also appear on the United Nations list of least-developed nations. Some Tier 3 countries (Syria, Central African Republic) are at war; others (Zimbabwe, North Korea) are dictatorships.

Thailand's ambassador to the United States, Vijavat Isarabhakdi, cited data showing that in 2013, 225 trafficking defendants were convicted, more than four times the 2012 figure. At least 33 police and five high-ranking police officials had been punished or were subject to criminal processes.

The head of Thailand's ruling military council, General Prayuth Chan-ocha, vowed to crack down on trafficking. Thailand, he said in his weekly television address, must not "repeat the past flaws which created opportunities for influential groups and entrepreneurs to exploit, coerce and violate human rights."

The State Department report said the Thai government had "demonstrated few efforts to address these trafficking crimes.

"Impunity for pervasive trafficking-related corruption continued to impede progress in combating trafficking," it said.

It found that Malaysia had made "inadequate efforts to improve its flawed victim-protection regime" and had investigated fewer trafficking cases than in 2012. Malaysia's downgrade had been largely expected.

The report said Venezuela had done too little to combat sex trafficking and forced labor and failed to produce a written plan to ensure compliance with minimum standards.

CdeBaca said the White House would decide on possible sanctions against Thailand within about 90 days. Last month, Washington canceled some security cooperation projects to protest against Thailand's military coup on May 22. (Additional reporting by Andrew R.C. Marshall and Ron Popeski in Bangkok; Editing by Lisa Von Ahn and Nick Macfie)